US embassy cable - 04PANAMA2937

C O N F I D E N T I A L SECTION 01 OF 03 PANAMA 002937 
 
SIPDIS 
 
 
DEPARTMENT FOR WHA/CEN/PIERCE 
SOUTHCOM ALSO FOR POLAD 
 
 
E.O. 12958: DECL: 11/24/2014 
TAGS: PREL, PGOV, ETRD, ECON, ENRG, PM, CO, VZ, LABOR, HUMAN RIGHTS,POLMIL 
SUBJECT: PANAMA, THE G4 AND "PLAN PUEBLA" 
 
REF: PANAMA 02452 
 
 
Classified By: Ambassador Linda Watt for reasons 1.4 (b) & (d). 
 
 
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SUMMARY 
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1.  (C)  Mexican President Vicente Fox publicly endorsed 
Panama's inclusion in the G3 (Venezuela, Colombia and Mexico) 
during his November 2-3 visit to Panama.  According to MFA 
Advisor Nils Castro and International Organizations Director 
Javier Bonagas, the GOP's primary interest in joining the G4 
is to integrate Panama's economy with the much bigger G3 
markets and thereby make Panama an economic bridge between 
the Andean countries and Mexico.  Panamanian policy makers 
believe joining an informal G4 grouping will help them meet 
Panama's foreign relations objectives (see reftel) of 
developing the economy, attracting foreign investment and 
improving job opportunities.  One drawback to joining the G4 
is that the GOP is wary of expanding economic ties with 
Mexico to the point that its farmers drown in a tidal wave of 
Mexican agricultural products.  Joining the G4 may increase 
economic ties with Colombia, but also bring unwanted 
Colombian proposals to extend the Pan-American highway 
through the Darien gap, which Panama is trying to fend off. 
Panama and Colombia are also discussing natural gas and 
electrical links with Venezuela.  End Summary. 
 
 
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JOINING THE G4 
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2.  (C)  During his November 2-3 visit to Panama, Mexican 
President Vicente Fox encouraged Panama to join the (G3) 
Group of Three (Venezuela, Colombia and Mexico) which began 
with a three-way FTA in 1995 and had its first summit in 
April 2001.  While Colombia initially opposed Panama's 
membership, at a November 5 meeting in Brazil, Panama Vice 
President Samuel Lewis Navarro joined Venezuelan President 
Hugo Chavez, Colombian Present Alvaro Uribe and President 
Vincente Fox to formally announce Panama's inclusion in the 
Group of Four (G4).  From Panama's view, MFA Advisor Nils 
Castro told PolOff on November 24 that while the G4 is a 
political, social and economic agreement, Panama mainly wants 
to use the G4 as a four-way FTA.  Ultimately, Panama wants to 
expand its relations to the Andes region and negotiate FTAs 
with Peru, Ecuador and possibly Chile. 
 
 
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COURTING MEXICO 
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3.  (C)  In truth, Castro continued, Chile is a much better 
FTA partner for Panama because the two countries cultivate 
different agricultural products making their markets 
complementary, rather than competitive.  Mexico by contrast 
produces many of the same products as Panama, but with 
greater resources and 30 times the population, so Panamanian 
farmers could not compete.  Panama must have safeguards to 
protect a large sector of its work force that relies on 
commercial agriculture, explained Castro.  Mexico is offering 
some sweeteners to Panama, for instance, extended 
professional visas for Panamanian businessmen and possible 
removal of Panama from a taxation "black list."  More than a 
dozen big-name Mexican investors accompanied Fox to Panama. 
They included Carlos Slim, who owns Carso Group; Lorenza 
Zambrano, Latin America's richest man according to La Prensa, 
who owns Cemex (one of the world's largest cement 
manufacturers); Ricardo Salinas Pliego, owner of Azteca 
Television; Bernardo Quintana, founder of Civil Engineers 
Association, Inc., and others.  Fox claimed that Mexican 
investment in Panama currently totals $1.2B. 
 
 
4.  (C)  During a recent meeting, Mexican Embassy Political 
Officer Armando Obregon Jimenez told PolOff that Mexico's 
interest in including Panama in the G4 is linked to another 
regional initiative, Mexico's Inter-American Development Bank 
proposal, Plan Puebla Panama (PPP).  PPP includes eight 
counties: Belize, Costa Rica, El Salvador, Guatemala, 
Honduras, Nicaragua, Mexico and Panama. PPP is an integrated 
social and economic proposal to spur development of Central 
American infrastructure including trade, disaster response, 
regional utilities, roads and other public works projects, 
using Inter-American Development Bank funding.  PPP began 
with the 1991 Tuxtla Agreement between Mexico and seven 
Central American nations and was formally launched ten years 
later on June 15, 2001.  Mexico sees Panama's inclusion in 
both the G4 and the PPP as critical for regional development 
due to its central geographical location. 
 
 
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AVOID THE ROAD TO COLOMBIA 
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5.  (C)  In a resolution signed November 18 in San Jose, 
Colombia joined the PPP as an observer.  Both the PPP and G4 
give Colombia more avenues to pressure Panama for a road 
through the Darien gap.  Nils Castro, the GOP's PPP 
representative, said that the GOP is seeking alternative 
solutions to avoid the highway discussion but continue with 
other links.  One option is sub-oceanic gas and electric 
pipelines from Venezuela, through Colombia and along the 
Caribbean coast of Panama.  That route would maintain the 
integrity of the Darien gap, which acts as a natural barrier 
against hoof and mouth disease, malaria, screw worm and other 
diseases.  Already facing problematic illegal immigration and 
narco-arms trafficking from Colombia, Panama is less than 
eager to open a new immigration route to Colombia.  Panama 
environmentalists also strongly oppose building a road 
through the Darien.  Castro explained that the GOP is working 
on alternate plans of ferry transport along the Caribbean 
coast and/or new air freight routes between the two nations 
for commercial goods.  Currently, he said Panama-to-Colombia 
air connections are passenger flights. 
 
 
6.  (C)  Eventually, Castro said, a road to Colombia will be 
built.  However, the GOP hopes to wait until they have 
developed enough of a tax base to reinforce their customs, 
immigrations and public forces to ensure security at the 
Colombia-Panama border crossing when it opens.  He voiced 
concern about public reaction to a road.  Panamanians 
currently associate Colombia with violence, drugs, 
kidnappings and illegal immigrations.  They will not tolerate 
discussion of a road now, Castro explained. 
 
 
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VENEZUELAN GASOLINE AND NATURAL GAS 
----------------------------------- 
 
 
7.  (C)  Panama has high hopes of using the G4 to reduce the 
high cost of fuel.  Panamanian Public Forces (PPF) and the 
National System of Civil Protection (SINAPROC) frequently 
complain that they can not respond to floods or suspicious 
aircraft or boats due to the lack of fuel.  While the 
government is currently operating under an austerity budget, 
the additional problem is that the cost of fuel is high and 
officials have been announcing regularly in the press that 
they intend to seek assistance from Venezuela to lower the 
cost of fuel in Panama.  Castro also said that Panama must 
look for alternate fuels and mentioned natural gas-operated 
bus systems in other countries.  Castro said that GOP 
priorities for Venezuela are primarily for natural gas. 
Newspaper reports indicate that relations with Venezuela 
could lower fuel prices.  Castro said the GOP has no other 
commercial relations with Venezuela. 
 
 
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COMMENT 
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6.  (C)  The GOP accurately sees Panama as a minnow swimming 
with whales and is trying to advance its foreign relations 
and economic agendas to expand its economic base without 
getting crushed in the process.  Senior GOP officials, 
including Minister of the Presidency Ubaldino Real and 
Minister of Trade and Industry Alejandro Ferrer, have 
extolled the benefits that NAFTA has brought to Mexico as a 
way of pushing a pro-free trade agenda.  Given the "thinness" 
of expertise at the top, the GOP risks overextending itself 
in joining the G4.  The G4, the PPP, Colombia's pressure for 
a road, and Mexico's pressure to open the Panama market all 
present positive and negative possibilities which Panama is 
struggling to manage politically. 
 
 
WATT